Hedge Funds Achieve Best Half-Year Performance Since 2021, Driven by Chip and AI Trades
The hedge fund industry has staged a stunning reversal, recording its best first-half performance in five years with an average return of 7.2%, buoyed by semiconductor and AI bets after severe volatility in the first quarter. Whale Rock surged 72.5%, while Millennium raked in $3.7 billion in a single month, as chip stocks delivered their strongest quarterly performance on record
After experiencing severe volatility in the first quarter, the hedge fund industry has staged a strong reversal, posting its best first-half performance in five years thanks to bets on semiconductors and artificial intelligence.
On Wednesday, citing data from research firm PivotalPath, Bloomberg reported that as of June 30, 2026, hedge funds achieved an average return of 7.2% in the first half of the year, marking their strongest performance for the period since 2021. Among them, hedge funds focusing on technology stocks led the entire industry, with average returns reaching as high as 27%. Marshall Wace’s Eureka fund rose 19.9% cumulatively in the first half, while D.E. Shaw’s macro strategy fund, Oculus, posted an even higher return of 27.4% during the same period.
Chip stocks recorded their best quarterly performance in history this quarter, becoming the core engine driving this rally. Meanwhile, a series of index adjustment events, such as the rapid inclusion of SpaceX into the Nasdaq and FTSE Russell indices, also generated substantial profits for certain strategies. Two teams at Millennium Management focused on index change trades alone captured approximately $3.7 billion in profits in June.
Behind the Reversal: Dual Drivers of Tech Bets and Index Trading
In the first half of this year, technology-themed bets and index rebalancing strategies became the two main sources of excess returns for hedge funds.
Whale Rock Capital Management emerged as the standout winner of the first half with a 72.5% gain, deriving its profits mainly from holdings in semiconductor companies and bets on Anthropic PBC. Appaloosa Management achieved a 32% return in the first half, primarily benefiting from the memory chip sector, which surged this year due to skyrocketing demand for AI computing power.
Trading opportunities arising from index adjustments should not be overlooked either. Events such as the rapid inclusion of SpaceX into benchmark indices like the Nasdaq and FTSE Russell created considerable profits for funds skilled in index rebalancing strategies. Two teams under Millennium Management specializing in such trades recorded approximately $3.7 billion in profits in June alone, significantly boosting the monthly performance of this multi-strategy hedge fund.
In March this year, the hedge fund industry faced severe tests. The war in Iran substantially blocked shipping lanes in the Strait of Hormuz, pushing oil prices higher and triggering market concerns about a resurgence in inflation. Earlier, panic over the disruptive impact of AI had triggered a massive sell-off in software stocks, causing significant losses for some hedge funds. However, as the rally in chip stocks gained momentum, the impact of these shocks has gradually faded from market memory. The first-half results from multiple institutions indicate that the industry as a whole has fully recovered from the March lows.
Consistent Robust Performance Reignites Investor Enthusiasm
The appeal of hedge funds is rebounding, driven by their consistently robust performance in recent years and the contrast effect created by investor disappointment with other alternative asset classes, such as private equity.
Data from PivotalPath shows that since January 2020, hedge funds have achieved a compound annual growth rate (CAGR) of 8.5%. Jon Caplis, head of PivotalPath, stated, "It is this consistency in performance that has made hedge funds attractive to capital again, especially against the backdrop of issues emerging in private equity and credit markets."
Despite the industry's overall impressive performance, internal divergence cannot be ignored.
According to insiders, ExodusPoint Capital Management rose only 0.2% in June, lagging behind its multi-strategy peers, with a cumulative gain of just 4.3% in the first half of the year. Meanwhile, quantitative hedge funds are experiencing their worst period since 2023, forming a sharp contrast to the strong performance of technology-themed funds.
